What does life after debt look like? I have no idea, since I’ve never been there! But here’s how I’m planning to restructure what I currently pay off on debt towards paying myself. In reality, it looks an awful lot like my current budget:

Budgetary Savings for Big Expenses (aka my “mini funds”)

401K: increase my pre-tax 401K spending on my paychecks to 10%-13% of my salary. Currently I’m at 6%. In January 2014 I’m going to increase it to 7%. I’ve been trying to increase it by 1% a year.

Car: save $300 towards car repairs/new car purchase each month. I’ve never flat out “bought” a car before, I’ve always financed it. How nice to walk in, cash in hand, and just buy on the spot. My last vehicle was $16K, so I’d like to save up $15K at least, but that will take a very long time. Hmm. Maybe I’ll keep saving my “normal” car payment of $250/month plus $100 for maintenance?

Trips: continue to save $100-$150/month for travelling. Haven’t done it yet, but would like to do some more large-scale trips (like Europe!), those are $2K-$3K easy.

Medical: I do need to save about $200 monthly for pills, and other out of pocket expenses like acupuncture and supplements (via my Naturopath).

Gifts: no big family, and none of my friends are in the wealthy/excessive gift-giving category, so I’ll keep it at $35 per month. I often have leftovers after the xmas holiday, so I know I’m in the right range.

After all that (which is basically my current budget, unchanged), that leaves me with my extra debt payments of $650-$700/month. Since I won’t have debt any longer, I need to invest it in myself.

Investing in Myself (Retirement, Buying a House, a larger EF)

First step: save a cushion of 3-6 months of living expenses. Based on my current budget, adding together my food and restaurant expenses, gas (though I expect I’ll be driving less without a job!), bills (rent, internet, electricity, Hulu, car insurance), money for stuff (in which I lump everything non essential that always happens, such as hair cuts, buying clothes, entertainment, photo/art supplies, things for the house), and about half of my medical fund. If things get bad, I will probably cancel any acupuncture that I have, so less will be fine. This comes out to $2069, or $2K a month. I think having a flat $10K available in case of a job loss would be smart. That will take me 3/4 – 1 year to save if I do nothing else.

Second step: save for retirement. I have no idea how to go about this. Putting money aside from my paycheck seems easy. Figuring out how to invest it wisely, not so much. I need to learn how to invest in the stock market. Mutual funds are not doing me much good, and I don’t know how to do stocks. So I’ve gotta learn! Still not sure what to do in this regard, but thinking of having half my available money go towards the above and half towards investing. This could be through an IRA/Roth IRA if I can invest it rather than do a mutual fund. Again, I’m not entirely sure yet, but it appeals to me, doing investing immediately, as the sooner the more long-term rewards and the more growth occurs.

Third step: save for a house. I don’t know that I want to buy a house, but I’m enough of a nester to know I probably should have one. I’ll probably need 20% down, which would be $40,000 minimum (most houses here are $250K-$300K to start). That’s a lot to save as a single person! I can see keeping up monthly saving long-term. The $10K living expense cushion can keep growing and become my down payment. If I haven’t used it, I can always apply it towards a house then build it up again just for living expenses or catastrophic house repairs.

The above assumes that I remain single, employed, and doesn’t account for any huge increase in pay. Not sure where I’ll be working (or for how much) in the coming years, but I do expect I’ll start looking for a new job at some point. Anyway, this is a rough frame work for how I see my spending habits as of next summer, when I expect to be FULLY OUT OF DEBT! Can’t wait. In fact, I’m doing the wiggle dance of anticipation right now!!